Recent Posts:

Do you think about money a lot these days? Worried about whether you’ll have enough cash to retire on time — or ever? Afraid of what will happen to your family if an emergency strikes, since you don’t have enough of a cushion in your bank account?

You’re not alone. American savings are desperately low right now.

Much of the mayhem that has been wreaked on U.S. savings is attributed to the financial crisis. But some of the fallout is self-inflicted as 401k investors and older American workers get dangerous and sometimes desperate with their nest eggs.

Here’s some of the trouble that’s going on:

Loans of Last Resort

If you have a decent nest egg, you can take loan out of your 401k at a reasonable interest rate and with minimal penalties. But if you fail to repay that loan, it’s as good as an early withdrawal and subject to a 10% haircut.

The motivation for this kind of 401k depletion is clear: desperation. Families tap their nest egg to get through a rough patch — such as the loss of a job or an ARM adjusting up its interest rate — but never get their heads back above water in time to repay the loan.

If you think this kind of behavior was only a function of the 2008-09 downturn, think again. According to a stark report by the Brookings Institution and Navigant Economics, many Americans still are borrowing against their 401k plans, and many are failing to pay the cash back and being hit with the penalties.

Defaults are sucking out up to $37 billion annually, and researchers project the default rate between July 2011 and May 2012 was 17.4% — down from a peak of 19.8% during the depths of the financial crisis, but an ugly number all the same. Before the recession, default figures were half that at under 10% for summer 2008.

Day Trading Retirement Funds

Of course, some older Americans aren’t immediately feeling the burn. They can keep the lights on with their current situation … though admittedly, retirement seems wholly out of reach.

The result is increased risk-taking among this group as they try to make up for lost time (and money). A recent report from Aon Hewitt shows the average 60-year-old has only $114,500 in his or her 401k — which is a measly $4,580 annually if you plan on living another 25 years. But the scary part is that half have less than $37,300 in total.

The result is, in a word, panic. Older workers will try just about anything to juice returns, even if it’s risky.

“There is — I don’t want to use the word ‘desperation’ — but it’s close to that,” Fischer told the Times. “Ten years of a flat stock market bumps up against reality for people in their 50s or 60s who are running out of time to see appreciation.”

Smart investment decisions, of course, will grow your money faster. The risk is very real.

Lower Savings Rates

Click to Enlarge In the depths of the recession, many employers cut their 401k match plan and many employees rolled back their savings rates. After all, the need to survive was much more important than a need to plan long-term — and that goes for both businesses and workers alike.

But while things have improved across the board, roughly a quarter of companies aren’t as generous with their retirement benefits.

A November 2011 report from business consultant Towers Watson shows that 75% of the 260 companies they surveyed have restored their retirement benefits to the same level, but 23% aren’t offering as rich a package.